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Time to look at 80% LTV caps, says former cabinet secretary

Treasury 480

Lord O’Donnell is urging the Government to push ahead with plans to introduce an LTV cap in order to bring individual borrowing under control.

In an interview with the Financial Times, the former cabinet secretary says the Government should follow Canada and look at strict limits on borrowing. He suggest 80 per cent as a guide

Lord O’Donnell says: “I think we should debate whether there should be regulations. Canada has some successful rules and some successful banks. We have some really good role models.

“I personally would urge [the government] to think about what a right level of loan-to-value ratio is. We should not encourage a move back to where it is very easy to borrow a lot.”

In a House of Commons debate in February, Chancellor George Osborne outlined plans to give the Bank of England’s financial policy committee the power to limit high LTVs as a lever to control growth.

In March, the FPC rejected the power, claiming it was too important to society and would require a parliamentary mandate.

However, in September the Treasury launched a consultation on the macro-prudential powers which could still result in the FPC being awarded the power to cap LTVs. The consultation closes on 11 December.


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Absolute nonsense !!!

  2. We are already in a dreadful mess with the crisis being exacerbated by the MMR and the ‘responsible lender’ dictum.

    We are perilously close to a full-scale property crash with massive reprcussions and another ‘thinker’ has decided that a bit more Governmental tinkering is wise.

    Unless you know what you’re talking about, shut up.

  3. Seeing as the Cabinet Secretary role brings an annual salary of around £235k, I would estimate that Lord O’Donnell would have no personal problem in raising a 20% deposit himself.

    *knock knock* Who’s there? The real world….

  4. Rob Derry (Brunel Mortgages & Loans) 12th October 2012 at 3:18 pm

    I thought the FSA’s own analysis in one of the many MMR consultation documents had already shown that high LTV was not a factor that led to arrears?

  5. I find myself asking if these people really are as stupid as their comments suggest they are? Is it really possible that he does not realise just how rediculous what he is proposing is, and more importantly just how badly it would affect every aspect of our economy, from retail sales to the rediculous levels of rent charged to councils by private landlords.

    The main reason people get in arrears is because of unemployment and Lenders looking to make profit out of the scenario by instantly charging fee’s and doing everything possible to cause respossesion by ensuring it remains unaffordable.

  6. Time for revolution my friends. The country is largely run by possessors of great wealth and they are creating the rules that will impoverish the middle and working classes. They are so wealthy that they cannot begin to comprehend the effects on our consumer driven economy that the denial of credit creates. OK for Govenrments to borrow excessive levels but not the general population. So watch the unemployment rise through all service sector industries and all industry connected to construction. The great depression pf 2013- 18

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